But the growth of Pinduoduo has sparked an argument focusing on whether the platform represents consumption downgrading. It is just one more piece of evidence for how big and segmented the Chinese market can be. Consumption upgrade, a trend in which affluent Chinese customers are increasingly willing to pay for quality, has dominated China’s e-commerce industry in the past few years. Taobao and JD’s globalization initiatives to bring overseas quality products, the boom of cross-border e-commerce sites like Red and NetEase Yanxuan and Kaola are all based on the consumption-upgrading backdrop. Pinduoduo’s C2B model allows it to ship directly from the manufacturers eliminates layers of distributors, not only reduces the price tag for buyers but also raises the profit of manufacturers.
Founded in 2015, Pinduoduo is a mobile-only marketplace that connects millions of buyers directly with sellers. It has become one of China’s most popular e-commerce platforms in recent years for fresh produce, household canadian forex brokers items, clothing and electronics. The company aims to bring more businesses and consumers online so that local communities and rural agricultural prodcuers can benefit from the growth of the digital economy.
- While Alibaba and JD.com make most of their money from e-commerce, they both have other emerging businesses such as cloud computing.
- Driven by sharing on WeChat, Pinduoduo’s average customer acquisition cost is only $2, compared to $39 and $41 for primary rivals JD.com and Taobao.
- Second, Pinduoduo’s customer acquisition cost, as well as user engagement numbers, are significantly better than those of its main rivals.
- After downloading and installing, users must provide details manually or choose other login methods.
- As a result, Pinduoduo’s push into the global e-commerce markets (mainly through Temu) is predicated on a sustainable profitability base.
However, Pinduoduo has taken its low-cost approach to such success that its previously larger peers have fallen by the wayside. Seeking Alpha’s Quant assigns PDD a best-in-class « A+ » profitability grade relative to its peers. Morningstar rates PDD with a « narrow moat, » corroborating its sustainable competitive advantages. Wall Street analysts expect Pinduoduo to post a free cash flow or FCF margin of 34.7% in FY23.
1 WeChat facilitate Pinduoduo with its huge data base
Similar to most other early-stage e-commerce stocks, Pinduoduo was unprofitable for around 5 years after launching. The company’s first ever quarterly net profit was recorded in the second quarter of 2021. The GMV basically represents the value of the total amount of goods purchased on the company’s platform. The total gross merchandise volume (GMV) on the Pinduoduo platform has increased from US$72.75 billion in 2018 to $383 billion in the 2021 calendar year.
A team needs to be formed within a 24-hour timeframe and contain a set number of buyers willing to pay the price set by the manufacturer. Founded in 2015, Pinduoduo has grown to become China’s largest marketplace (measured by active buyers). Pinduoduo has captured this chance which helped boost itself through the rural online sales. Pinduoduo’s growth came from an existed crowded Chinese ecommerce environment, dominated by Alibaba and JD.com.
How much does it cost to do business in the Pinduoduo?
And how did Pinduoduo achieve it in the face of such large established competitors? There are many factors, but one of the most interesting is how Pinduoduo has successfully gamified shopping for the most mundane everyday products to drive re-engagement and user retention. But in terms of customers, Pinduoduo was actually the second-largest e-commerce marketplace with 868.7 million annual active buyers at the end of 2021, which represented 10% growth from a year ago. Alibaba and JD ended the calendar year with 979 million and 569.7 million annual active buyers in China, respectively. As other e-commerce companies focus their resources on high-priced areas, manufacturers, accustomed to competing at lower prices, are seeing fewer and fewer channels for the distribution of products and services. Low-price areas have become a competitive field and threaten to further restrict the circulation channels.
Why Pinduoduo succeeded and what problems are stopping its growth?
Having one of the first ad spots is thereby an extremely lucrative spot for merchants. On top of that, Pinduoduo also puts greater emphasis on the discovery of new products. For instance, the search bar is hidden at the bottom of its front page, which encourages the customer to browse the feed (and thus aids product discovery). The actual placement, as well as the price paid by merchants, is ultimately determined via an online bidding system.
It also allows customers to purchase through popular social media apps in China, such as WeChat and QQ. Pinduoduo (PDD) is an e-commerce https://broker-review.org/ platform that offers a wide range of products. The company sells everything from groceries and home appliances to iPhones.
Apart from greater transparency and delivery speed, this also added a potentially lucrative line of revenue as Pinduoduo could charge merchants for logistics services. Pinduoduo, in order to establish itself with more affluent users in cities like Beijing and Shanghai, began onboarding international brands onto its platform. Dubbed Duoduo International, the platform would host authentic products from brands like Apple or Nike. Three months later, the company announced that it would merge with Pin Hao Huo, which brought in the latter’s catalog of products (primarily farm produce) onto Pinduoduo’s platform. By the end of 2016, Pinduoduo had already managed to attract more than 100 million users while monthly sales reached around $362 million. Read along as we share insights on why you should utilize Pinduoduo for your local e-commerce business goals and guide you on how to navigate the app, from account creation to launching digital marketing campaigns.
If you are interested in our analysis and want to know more about the Chinese e-commerce market, we can send you our material. Discovers our eCommerce solutions for China &feel free to contact us, we will be very happy to share our experience and knowledge with you depending on your project in China. At the same time, it should also be noted that Pinduoduo’s rapid growth is at the cost of a huge deficit. The company lost 7 billion yuan last year and 4.1 billion in the first quarter of this year.
Learn from Alibaba to Tell a Good Story
As a result, sellers established more robust relationships with group buyers, allowing them to benefit from discounts. Pinduoduo, which was founded in 2015, initially attracted a lot of shoppers with a discount marketplace that promoted bulk orders. By teaming up with other shoppers — which Pinduoduo actively encouraged with integrated social media links — consumers could score steep discounts on select products.
Things About Pinduoduo That Smart Investors Know
Each item has a minimum number of buyers required to complete the purchase. If that number is not met within 24 hours, then the group buy is cancelled and those who have already committed money will be refunded. He runs the investing group Ultimate Growth Investing which specializes in identifying high-potential opportunities across various sectors. The group is designed for investors seeking to capitalize on emerging, high-growth opportunities, and investors looking for sustainable growth opportunities at a reasonable price. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
thoughts on “What is Pinduoduo & How to Get Started [Marketing Guide]”
The most typical Pinduoduo users are price sensitive women that reside in low tier cities. But how to maintain these users and its growth momentum is a big challenge for Pinduoduo now given rising product quality complaints. Cost performance is still the most important factor to consider for consumers.